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17th September 2014

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Khaw's vision: Fewer cars, better lifestyles

Source: Straits Times / Singapore

CARS may one day go out of fashion in Singapore, said National Development Minister Khaw Boon Wan, as he envisions a city with fewer vehicles and more space for living.

"It is already happening in some European cities," he wrote on his blog yesterday.

"Youngsters no longer see a need to take driving lessons, let alone buy a car. People are walking, cycling, taking public transport. The occasional car needs can be satisfied more coolly, via Uber or Zipcar or many such local ride-sharing equivalents."

This would transform lifestyles and the city landscape for the better, and render carparks "excessive and redundant", he added.

That is why it is useful to participate in Singapore's second annual Park(ing) Day on Friday, he urged. The event, supported by the Urban Redevelopment Authority, allows the public to temporarily transform carpark spaces around the island into anything from gardens to living rooms.

The global initiative, which began as a single installation in San Francisco in 2005, now has a following of more than 160 cities across six continents. Most of the carparks here that will undergo the creative transformation this year are located in Jalan Besar and the Central Business District.

So far, there have been about 50 registrations from community groups, local businesses and student bodies, said Mr Khaw. One of the ideas is a pop-up repair cafe, where one can learn to mend items such as furniture, clothes and shoes.

Last year, four parking spaces in Circuit Road were turned into gardens, which also doubled as pedestrian crossings. "The mission is to get everyone to envision a city with fewer cars, and more space for people, for living," said Mr Khaw.

-By Yeo Sam Jo

Singapore Real Estate

New EC launches to give property market a boost: Analysts

Analysts expect the launch of three executive condominium projects in the coming weeks to give the relatively quiet property market a much needed boost. Chestertons says the buzz could potentially spur other developers to roll out more mass market projects.

Source: Channel News Asia / Business

SINGAPORE: Developers of executive condominiums (ECs) had been enjoying roaring business, up until measures introduced by the Government last year curbed demand and eased the pace of new project launches.

The measures included a rule that restricts developers from selling units until 15 months from the award of the sites or after foundation works are completed. In addition, the Mortgage Servicing Ratio (MSR) for housing loans granted by banks for EC units bought directly from property developers was also capped at 30 per cent of a borrower's gross monthly income.

Bellewoods at Woodlands Avenue 5 will be first off the blocks and home owners can apply for a unit online starting from Sep 27. That is closely followed by two other project launches - Lake Life at Yuan Ching Road and Bellewaters at Anchorvale Crescent. Together, the three projects will inject more than 1,700 EC units - 561 units at Bellewoods, 546 units for Lake Life and 651 units at Bellewaters - into the market.

Analysts said the new developments will excite the market after nearly a year without an EC launch.

Mr Donald Han, managing director of Chestertons, said: "The EC projects to be launched in the next month or so will create a spur factor for other developers to join in the momentum and to launch more mass market projects, which could potentially see a trickling effect on volume of sales coming back to the marketplace at least for the fourth quarter of 2014."

Still, Qingjian Realty, developer of Bellewoods and Bellewaters, said buying activity may not reach the fever pitch seen in previous years. "The strong sell-out demand is not coming back. Now, the market is in a more stable state and it will take a longer time to sell EC units," said Mr Li Jun, general manager at Qingjian Realty.

"EC prices are hovering around S$800 per square foot (psf) while private home prices are still averaging above S$1,000 psf. There's still a S$200 difference," he pointed out.

Qingjian said prices for units at its two new EC projects will average between S$750 and S$820 psf.

Due to tighter loan restrictions, the developer expects more buyers to tap the deferred payment scheme, that enables buyers to start servicing their loans upon the completion of project. Qingjian said that on average, about 10 to 15 per cent of buyers made use of the scheme in the purchase of units at their earlier EC projects, which included RiverParc Residence, Waterbay and Ecopolitan.

Marketing activity has started for Lake Life at Yuan Ching Road, the EC project with a record land price at S$418 psf per plot ratio. It is the first EC launch in Jurong in 17 years.

An Evia-led consortium beat 15 other bidders to the site in the land tender, and it is now aiming to garner 2,000 e-applications for the project. "There's a lot of pent up demand, especially for Jurong. It's been 17 years since the last executive condominium launch, the entire transformation of Jurong has actually created a lot more interest in the region," said Mr Vincent Ong, managing partner at Evia Real Estate.

Among the offerings, Evia said Lake Life will provide subsidised or free tennis lessons, cooking classes as well as a tie-up with True Fitness. There will also be smart home automation features at Lake Life.

Mr Ong added: "It is our objective to be part of this smart city initiative. Pending LTA approval, we would like to see our buyers being provided with a free shuttle - an electric vehicle, autonomous without a driver, which travels to and fro between the condo and the MRT station."

Analysts said the three EC launches could potentially affect private home sales at nearby projects as their pool of buyers overlap, in particular, those upgrading from HDB flats.

- CNA/ac

Tuas South industrial site released for sale

The 9,000sqm site was successfully triggered from the reserve list with a minimum bid price of S$6 million, JTC says.

Source: Channel News Asia / Business

SINGAPORE: JTC Corporation (JTC) has launched an industrial site at Tuas South Street 11 for sale by public tender under the second half of the Industrial Government Land Sales Programme.

The 9,000sqm site was successfully triggered from the reserve list with a minimum bid price of S$6 million, JTC said.

Zoned for Business-2 development, the land parcel has a 20-year 10-month tenure and a maximum permissible gross plot ratio of 1. The gross plot ratio refers to the amount of gross floor area the developer can build in relation to the land area.

- CNA/cy

Local banks likely safe from housing slowdown: Report

Anti-speculation actions, economic growth set to offset mortgage weakness

Source: Straits Times / Money

HOME sales here may be waning but local banks should be shielded from the worst effects of a property market decline, according to a brokerage report released yesterday.

Maybank Kim Eng research head Ng Wee Siang said in the note that anti-speculation measures and positive economic factors should help the local banks to shrug off any mortgage weakness they may face.

Anti-speculation measures, imposed as early as late 2009, helped to curb demand in the residential property market.

They included the imposition of a 50 per cent loan-to-value ratio on second housing loans for individuals and a 40 per cent one for their third and subsequent home loans.

The loan-to-value ratio indicates how much cash a buyer has to put down when buying a home, with higher out-of-pocket cash for a lower ratio.

"These anti-speculation measures should shield our banks from a sharp slowdown in the housing market, to a certain extent," said Mr Ng.

Local banks could also get support from an expected modest 3 per cent growth in Singapore's economy, which should keep employment high and stave off a scenario of runaway non-performing loans.

Property developers are now in better shape than before the onset of the 2008 global financial crisis, observed Mr Ng.

Financially stronger developers would imply a less urgent need for aggressive price cuts in their projects which could dampen market sentiment, he added.

Banks should also be able to benefit from a gradual and modest increase in interest rates, which will allow the market to digest the impact of a hike.

"This should protect their portfolio quality as interest rates rise," Mr Ng said.

Maybank Kim Eng is projecting that the three- month Singapore Interbank Offered Rate (Sibor) will be unchanged at 0.4 per cent this year, before rising to 1 per cent by the end of next year.

The Sibor is the rate that banks lend to one another and is commonly used to set mortgage levels.

There had been concerns that banks' profitability could be held back by weakness in their home loan books.

But Mr Ng noted that throughout the periods of recession here, such as during the 1998 Asian financial crisis and the 2003 severe acute respiratory syndrome crisis, Singapore banks' housing non- performing loans ratio by and large stayed below 5 per cent.

The exception was OCBC Bank, which saw a peak housing non-performing loans ratio during the Asian financial crisis of 9.8 per cent.

Maybank Kim Eng has chosen DBS Bank as its top pick in the sector, with a possible 26.3 per cent upside in the target share price, followed by United Overseas Bank with a 9.8 per cent upside and OCBC with 3.4 per cent.

It is remaining cautious on OCBC, given the execution risks in its acquisition of Wing Hang Bank.

-By Mok Fei Fei

Reverse mortgages in the spotlight

They offer option to ease cash woes of low-income retirees with private homes

Source: Straits Times / Money

They offer option to ease cash woes of low-income retirees with private homes

THE plight of asset-rich but cash-poor Singaporeans has revived talk that reverse mortgages could prove a solution for some people.

Being asset-rich but cash-poor affects a number of retired people here. They tend to own their own home but have a limited income. They have few options other than renting out their rooms for some ready money or downgrading to a smaller house, but selling the family home is often seen as a step too far.

Financial advisers say reverse mortgages could allow such people to unlock equity tied up in property so they can generate cash instalments to make their retirement years easier while being able to remain in their own home.

OCBC Bank and NTUC Income began offering such mortgages in 2006 but they were discontinued due to a lack of demand.

Only 38 private property and 10 HDB reverse mortgages are still being serviced by NTUC Income. Figures from OCBC Bank were unavailable.

The concept is simple: A borrower, typically a retired home owner, can convert some of the value in his home into cash while still living in it.

Unlike a traditional mortgage, the home owner does not make any payments but receives a monthly payout from the financing institution.

When the reverse mortgage reaches the end of the pre-defined loan period, it becomes due with interest, which the bank collects by selling the home. The same goes when the home owner dies, sells the home or moves out.

While HDB home owners have access to a similar scheme called Lease Buyback, private property owners do not have the option, but financial consultants The Straits Times spoke to said reverse mortgages should be given another chance as they would be a good addition to the mix of home monetisation options available.

They would provide low-income retirees with "a practical and reasonable option", said SingCapital chief executive officer Alfred Chia. He noted that there may be some people who live by themselves with no future generations to take care of them so it is "always good (for them) to have more options".

Mr Jeff Lee, executive director of Synergy Financial Advisers, said reverse mortgages should be made available here, given the fact that the Government has done much to emphasise the need for home ownership.

But such schemes are likely to still be viewed as "last resort".

"The uncertainty of living beyond the loan period in a reverse mortgage and being chased out of the house can be quite unnerving," added Mr Lee. "At that age, most people would want to die in their homes instead of being forced to move. They would 'pawn' their homes only if they were really left with no choice - no cash, no money in their CPF, only their property."

Volatile interest rates may also be a concern for home owners, said Mr Chia.

"If interest rates spike, this may eat into the monthly payout and expedite a loan breach. The home owners will then find themselves with nowhere to go. As far as Asians are concerned, they prefer to leave behind assets for future generations," he said.

Some elderly people in private homes can certainly face hardship.

In Opera Estate in East Coast, for example, there are at least five households receiving social assistance from ComCare, the Government's main fund to help the needy and low-income families. But most of them would not have given a second thought to selling their homes or taking up a reverse mortgage, said Opera Estate's neighbourhood committee chairman Chris Chen.

"They have lived here for years and there are a lot of memories attached to the house, to the neighbourhood. It's not so easy to let go of their properties."

While reverse mortgages did not take off previously, Mr Lee believes that things might change if financial institutions could provide borrowers, especially those who outlive their life expectancy, with "more assurance".

"For instance, banks could offer home owners some form of insurance along with the reverse mortgage, so that they don't have to worry about being forced out of their homes once the loan period is up," he said. "But this will work only if there are enough home owners on board the scheme in the first place."

-By Jacqueline Woo

Real Estate Companies' Brief

Average 9.6% YTD total return for S'pore office Reits

Source: Business Times / Companies

SINGAPORE-listed office real estate investment trusts (Reits) have generated an average year-to-date return of 9.6 per cent and a median of 10.4 per cent, according to an SGX My Gateway report.

These compare with the respective rates of 10.2 per cent and 10.5 per cent for global office Reits.

The median indicative yield of the six trusts in Singapore is 6.1 per cent compared with the global average of 4.5 per cent and the global median of 4.3 per cent.

According to Bloomberg, the average debt-to-asset ratio as of the last filing for the Singapore Office

-By Mindy Tan

Global Economy & Global Real Estate

China's FDI drops even as outbound investments rise

The 112.1% increase in ODI is a dramatic contrast to the 14% y-o-y fall in FDI

Source: Business Times / China

[BEIJING] China's outbound investment more than doubled year-on-year in August to US$12.62 billion, data showed on Tuesday, far outstripping foreign direct investment (FDI) into the country, which dropped to a new multi-year low.

China has been actively acquiring foreign assets, particularly energy and resources, to power its economy.

Beijing has encouraged companies to "go out" and make overseas acquisitions to gain market access and international experience, and officials have said overseas direct investment (ODI) could exceed FDI this year.

The 112.1 per cent increase in ODI announced by the commerce ministry was a dramatic contrast to the 14.0 per cent year-on-year fall in FDI, which dropped to US$7.20 billion. Both sets of figures exclude investment in financial sectors.

-From Beijing, China

Norway Fund to Invest $1.5 Billion in Office Properties

Source: Bloomberg / News

Norway’s sovereign-wealth fund, the world’s largest, agreed to buy stakes in three prime U.S. office buildings for about $1.5 billion, extending a real estate shopping spree as it seeks higher-yielding assets.

Affiliates of Norges Bank Investment Management, which manages the Norwegian government’s global pension fund, is acquiring 45 percent interests the buildings from Boston Properties Inc. (BXP), the seller said yesterday in a statement. The properties are 601 Lexington Ave. in New York and the Atlantic Wharf Office Building and 100 Federal Street in Boston.

The fund has been expanding its holdings of high-quality properties in coastal cities. Norway’s $880 billion wealth fund formed a real estate group in July that will invest almost $10 billion a year over the next three years. The fund, whose holdings include properties on London’s Regent Street and Paris’s Avenue des Champs-Elysees, is required to have as much as 5 percent of its assets in real estate.

Norges Bank’s press office didn’t immediately respond to an an e-mail sent after regular business hours in Oslo yesterday.

The fund earlier this month agreed to buy a 49.9 percent stake in San Francisco’s Orrick Building, also known as Foundry Square II, through a venture with asset manager TIAA-CREF. Last year, it bought a 45 percent stake in in New York’s Times Square Tower from Boston Properties, the largest U.S. office real estate investment trust.

Citigroup Center

The Lexington Avenue property consists of a 59-story tower along with a six-story office-and-retail building that might be redeveloped, Boston Properties said. The tower was built in the mid-1970s as the headquarters of Citibank, and eventually came to be known as Citigroup Center as the bank made acquisitions.

Boston Properties acquired a controlling stake in the skyscraper from Citigroup Inc. (C) in 2001 for $725 million, according to Real Capital Analytics Inc., a New York-based research firm which tracks commercial property sales. Citigroup’s name was removed from the tower in 2009.

The Boston-based landlord said it will retain property and leasing management for 601 Lexington and the two Boston buildings under joint ventures with the Norwegian fund.

“This transaction represents an important step in executing our current strategy of recycling capital from existing assets into new development,” Boston Properties Chief Executive Officer Owen Thomas said in yesterday’s statement.

-By Hui-yong Yu

Washington Prime to Buy Glimcher Realty for $2 Billion

Source: Bloomberg / News

Washington Prime Group Inc. (WPG), a U.S. shopping-center landlord spun off this year from Simon Property Group Inc., agreed to buy Glimcher Realty Trust (GRT) for about $2 billion to create a diversified retail property owner.

Glimcher stockholders will receive $10.40 in cash and 0.1989 of a share of Washington Prime for each Glimcher share, the companies said today in a statement. Based on yesterday’s closing prices, the transaction values Columbus, Ohio-based Glimcher at $14.07 a share, a 33 percent premium.

The deal gives Washington Prime more malls, outlet and open-air shopping centers and an operating platform for its business, which is currently managed under an agreement with Simon that runs through May 2016. The combined company expects to increase income through higher occupancies and rents.

“This adds a very high quality mix of assets to our portfolio,” Mark Ordan, chief executive officer of Bethesda, Maryland-based Washington Prime, said today on a conference call with analysts. “This puts us in great shape.”

The transaction is valued at about $4.3 billion including debt, the companies said. The new entity, to be known as WP Glimcher, will have about 68 million square feet (6.3 million square meters) of gross leasable space at 119 U.S. properties.

Ordan will be chairman of WP Glimcher, which will be based in Columbus. Glimcher Realty Chairman and CEO Michael Glimcher will be CEO of the combined company.

Share Gain

Glimcher jumped 30 percent to $13.75, the biggest gain since March 2009 and highest price in six and a half years. Washington Prime fell 6.6 percent to $17.24.

“The new entity has a higher-quality portfolio and a solid balance sheet,” R.J. Milligan, an analyst at Raymond James & Associates Inc. in St. Petersburg, Florida, said in a telephone interview. “It’s a great price for Glimcher and it’s going to enable the new company to continue to acquire retail properties in the United States.”

Glimcher was founded in 1959 by Michael Glimcher’s father, Herbert, as Glimcher Co., a developer of strip centers and single-tenant buildings, according to the company’s website. Over the years, the company changed strategies and, under Michael Glimcher’s leadership, sold lower-quality properties and bought and developed higher-end shopping centers and open-air malls to boost growth.

Simon Buys

As part of the Washington Prime deal, Simon Property (SPG), the largest U.S. real estate investment trust, will acquire Jersey Gardens in Elizabeth, New Jersey, and University Park Village in Fort Worth, Texas -- properties currently owned by Glimcher -- for $1.09 billion in cash. Simon, based in Indianapolis, spun off Washington Prime in May to focus on its regional malls and outlet business.

Washington Prime, which has a market value of about $2.7 billion, needed to sell properties including Jersey Gardens to afford the Glimcher purchase, Ordan said.

“If we could’ve afforded it, we would’ve kept it,” he said on the conference call.

The combined company may seek to buy more properties where tenant sales are lower on a per-square-foot basis than at malls owned by Simon and other top-tier landlords, said Jeffrey Langbaum, a Bloomberg Intelligence analyst.

“They may want to grow to be the dominant player,” he said. When Simon spun off the company, “they clearly envisioned that there would be growth opportunities for Washington Prime.”

The purchase of Glimcher is scheduled for completion in the first quarter of next year. Citigroup Inc. is Washington Prime’s financial adviser, while GreenOak Real Estate LP and Morgan Stanley represented Glimcher.

The acquisition will be “slightly accretive,” Ordan said on the conference call, without giving details of the expected earnings impact.

-By Brian Louis and Prashant Gopal

Manhattan’s Trump Soho Condos Said Planned for Auction

Source: Bloomberg / Luxury

Lower Manhattan’s Trump Soho hotel-condominium tower, which has struggled to find buyers since sales started in 2007, is facing foreclosure.

CIM Group, a Los Angeles-based investment firm that holds a loan on the property, is planning to take control of the building and has hired brokerage Eastdil Secured LLC to handle the auction of the remaining condos, according to a person with knowledge of the matter, who asked not to be named because the details aren’t public.

Developed by the Sapir Organization and Bayrock Group LLC, the 46-story tower houses condos that may only be used by their owners for 120 days of a calendar year. For the rest of the time, they’re offered as hotel rooms, with owners sharing in the rental revenue. Donald Trump’s Trump Organization manages the hotel and licenses its name to the property, and has no equity stake in the tower.

The 391-unit Trump Soho has recorded about 122 completed deals, according to appraiser Miller Samuel Inc. Fifty-eight units are currently listed for sale, with prices ranging between $915,000 for a studio to $50 million for a 10,000-square-foot (930-square-meter) presidential suite, according to property-listings website

“The challenge of this building is a very high price per square foot paired with extremely high carrying charges related to the hotel services they were trying to market,” said Jonathan Miller, president of Miller Samuel.

High Charges

A 422-square-foot unit for sale on the 31st floor for $1.53 million, for example, has monthly common charges of $3,505, or about $8 per square foot. That amounts to a fee that is more than four times the Manhattan-wide average for a condominium, Miller said.

“This is essentially a hotel with hotel-like services, in a market with large residential lofts,” said Miller, a Bloomberg View contributor. “It didn’t seem to get traction.”

CIM offered new financing to the property in 2010, helping Sapir and Bayrock pay down $100 million of debt on the building owed to iStar Financial Inc. The existing mortgage at the time stood at $295 million.

CIM declined to comment on the planned sale, which was reported yesterday by the Wall Street Journal. Alex Sapir, president of the Sapir Organization, said in an e-mailed statement that the “current structure” of the property “does not make economic sense for ownership” and that his firm may someday seek to repurchase the hotel.

“I would like to thank my dear friend Mr. Donald Trump and the Trump Organization, who were valuable partners and provided excellent management services to the hotel, both during and after the Great Recession,” Sapir said in the statement.

Trump Organization will continue to manage the hotel, according to Alan Garten, the company’s general counsel.

“It’s a hot spot and prime destination for celebrities and jet-setters,” he said.

Eastdil Secured’s Douglas Harmon and Adam Spies are handling the foreclosure sale.

-By Oshrat Carmiel and Nadja Brandt

HUD’s Castro Looking to End Shame of Promoting Homeownership

Source: Bloomberg / News

U.S. officials will work with mortgage lenders to ease credit and boost homeownership, Housing and Urban Development Secretary Julian Castro said today in his first major speech since taking office in July.

“It’s time to remove the stigma associated with promoting homeownership,” the former San Antonio mayor said at a Bipartisan Policy Center forum. “When done responsibly, it strengthens communities and boosts our economy.”

Castro, 40, took over at HUD at a time when the agency’s focus on stemming foreclosures is giving way to concerns about tight credit. Home lending has dropped to a 17-year low.

HUD’s Federal Housing Administration is aiming to ease credit by rewriting its handbook to more clearly spell out when lenders can be forced to bear the cost of defaulted loans, Castro said. The agency today asked for public feedback on proposed changes to the way it identifies mortgage defects, with comments due by Oct. 15.

Castro’s speech didn’t address concerns raised by industry groups, including the National Association of Realtors, which have been urging FHA to reverse increases in fees it charges to insure mortgages with down payments as low as 3.5 percent.

Those increases, imposed to shore up FHA’s financially troubled insurance fund, have raised borrower costs for a $150,000 mortgage by more than $100 a month since 2008, according to the Realtors group.

FHA took a taxpayer subsidy of $1.7 billion last year, the first in its 80-year history, after loan-default losses of more than $50 billion.

HUD, which also oversees federally subsidized housing for lower-income families, will increase education and employment services for public-housing residents, he said.

“We’ll spend the next two-and-a-half years expanding opportunity for all Americans,” he said. 

-By Clea Benson